| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Accounting The accompanying consolidated financial statements and related notes of NSAM are presented on a carve-out basis for the periods prior to June 30, 2014 and have been prepared from the historical consolidated balance sheets, statements of operations and cash flows attributed to the historical asset management business of NorthStar Realty and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The consolidated financial statements for the years ended December 31, 2016 and 2015 represent NSAM’s results of operations following the NSAM Spin-off. In connection with the NSAM Spin-off, most of NorthStar Realty’s employees at the time of the NSAM Spin-off became employees of NSAM except for executive officers, employees engaged in NorthStar Realty’s loan origination business at the time of the NSAM Spin-off and certain other employees that became co-employees of both NSAM and NorthStar Realty. Therefore, subsequent to June 30, 2014, NSAM generally incurred substantially all employee-related cash costs. Periods prior to June 30, 2014 present a carve-out of NorthStar Realty’s historical financial information, including revenues and expenses attributable to NSAM, related to NorthStar Realty’s historical asset management business. Expenses also included an allocation of indirect expenses from NorthStar Realty, including salaries, equity-based compensation and other general and administrative expenses (primarily occupancy and other cost) based on an estimate had NorthStar Realty’s historical asset management business been run as an independent entity. This allocation method was principally based on relative headcount and management’s knowledge of NorthStar Realty’s operations. Additionally, periods prior to June 30, 2014 did not reflect the management agreement NSAM entered into with NorthStar Realty effective July 1, 2014. Principles of Consolidation NSAM’s consolidated financial statements include the accounts of NSAM, its operating partnership (“NSAM OP”) and their consolidated subsidiaries. NSAM consolidates variable interest entities (“VIE”) where it is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by NSAM. All significant intercompany balances are eliminated in consolidation. Variable Interest Entities A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. NSAM bases the qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. NSAM reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. NSAM determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for NSAM or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to NSAM’s business activities and the other interests. NSAM reassesses the determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions. NSAM evaluates the Managed Companies, investments in unconsolidated ventures and securitization financing transactions to which NSAM is the special servicer to determine whether they are a VIE. NSAM analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing. Voting Interest Entities A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If NSAM has a majority voting interest in a voting interest entity, the entity will generally be consolidated. NSAM does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote. NSAM performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework. Investments in Unconsolidated Ventures A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method, at fair value or the cost method. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. NSAM may account for an investment in an unconsolidated entity at fair value by electing the fair value option. NSAM may record the change in fair value for its share of the projected future cash flow or may follow the practical expedient of the net asset value of the underlying fund investment based on the most recent available information, which is generally on a one quarter lag. NSAM will record the change from one period to another in equity in earnings (losses) from unconsolidated ventures in the consolidated statements of operations. Any change in fair value attributed to market related assumptions is considered unrealized gain (loss). NSAM may account for an investment in an unconsolidated entity that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if it determines that it does not have significant influence. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment. NSAM reviews its investments in unconsolidated ventures for which it did not elect the fair value option on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value may be impaired or that its carrying value may not be recoverable. An investment is considered impaired if the projected net recoverable amount over the expected holding period is less than the carrying value. In conducting this review, NSAM considers U.S. and global macroeconomic factors, including real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred and is considered to be other than temporary, the loss is measured as the excess of the carrying value of the investment over the estimated fair value and recorded in equity in earnings (losses) of unconsolidated ventures in the consolidated statements of operations. Non-controlling Interests A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to NSAM. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. Redeemable Non-controlling Interests A redeemable non-controlling interest is the non-controlling interest in a subsidiary in which the holders have the ability to require NSAM to repurchase interests in the subsidiary. These interests are presented as redeemable non-controlling interests, outside of permanent equity on the consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) attributable to redeemable non-controlling interests. NSAM records the redeemable non-controlling interest at its redemption value and adjusts the carrying amount of such interest to the redemption value at the end of each reporting period, but such amount will not be less than the initial carrying amount. An allocation to a redeemable non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. Reclassifications Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation. Cash NSAM considers all highly-liquid investments with an original maturity date of three months or less and deposits held with third parties that are readily convertible to cash to be cash equivalents. Cash, including amounts restricted at certain banks and financial institutions and amounts held outside of the United States, may at times exceed insurable amounts. NSAM mitigates credit risk by placing cash with major financial institutions. To date, NSAM has not experienced any losses on cash. Restricted Cash Restricted cash primarily represents cash held by NSAM’s foreign subsidiaries due to certain regulatory capital requirements. Business Combinations NSAM accounts for purchases of assets that qualify as business combinations using the acquisition method where the purchase price is allocated to tangible and intangible assets acquired based on estimated fair value. The excess of the fair value of purchase consideration over the fair value of these identifiable assets is recorded as goodwill. Such valuation requires management to make significant estimates and assumptions, especially with respect to intangible assets including, but not limited to, customer relationships, acquired technology and trade names. Management’s estimate of fair value is based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ materially from estimates. During the measurement period, which is up to one year from the acquisition date, NSAM may record adjustments to the assets acquired, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in earnings. Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. On January 29, 2016, NSAM acquired an approximate 84% interest in Townsend for $383.0 million , net of post closing adjustments. The following table presents the final allocation of the purchase price of the assets acquired and the liabilities assumed upon the closing of Townsend (dollars in thousands): Assets: Cash $ 14,318 Investments in unconsolidated ventures (1) 17,738 Intangible assets 209,320 Goodwill (2)(3) 243,328 Other assets acquired 42,547 Total assets $ 527,251 Liabilities: Accounts payable and accrued expenses $ 34,312 Other liabilities acquired 26,476 Total liabilities 60,788 Redeemable non-controlling interests 75,320 Total equity (4) 391,143 Total liabilities and equity $ 527,251 _____________________ (1) Represents Townsend’s interest in real estate private equity funds sponsored by Townsend (“Townsend Funds”) (refer to Note 4). (2) Colony NorthStar expects $166.5 million of goodwill to be deductible for tax purposes. (3) Goodwill includes $5.5 million related to a share deal acquisition of the seller’s corporate entity. The deferred tax liability and corresponding goodwill are recorded at acquisition based on differences between book and tax basis. (4) Represents NSAM’s investment in Townsend prior to a post closing adjustment of $7.6 million relating to a distribution of excess cash to NSAM. From the Townsend Acquisition Date through December 31, 2016 , NSAM recorded revenue of $66.2 million and net income of $24.4 million . The following table presents unaudited consolidated pro forma results of operations based on NSAM’s historical financial statements and adjusted for the acquisition of Townsend and related borrowing as if it occurred on January 1, 2015. The unaudited pro forma amounts were prepared for comparative purposes only and are not indicative of what actual consolidated results of operations of NSAM would have been, nor are they indicative of the consolidated results of operations in the future (dollars in thousands, except per share data): Years Ended December 31, 2016 (1) 2015 (1) Pro forma total revenues $ 402,422 $ 501,776 Pro forma net income (loss) attributable to common stockholders $ 48,820 $ 115,621 Pro forma EPS - basic $ 0.25 $ 0.59 Pro forma EPS - diluted $ 0.25 $ 0.59 _____________________ (1) Excludes non-recurring transaction costs and prior compensation arrangements of Townsend. Intangible Assets NSAM records acquired identified intangibles, which includes intangible assets (such as goodwill and other intangibles), based on estimated fair value. Other intangible assets are amortized into depreciation and amortization expense in the consolidated statements of operations on a straight-line basis over the estimated useful life, reflecting the manner in which the related benefit is expected to be realized. Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. NSAM performs an annual impairment test for goodwill and evaluates the recoverability whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. NSAM first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount as a basis to determine whether the two-step impairment test is necessary. The first step in the impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, the second step is required to determine the amount of the impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with the carrying amount of such goodwill. The implied fair value of goodwill is derived by performing a hypothetical purchase price allocation for the reporting unit as of the measurement date, allocating the reporting unit’s estimated fair value to its net assets and identifiable intangible assets. The residual amount represents the implied fair value of goodwill. To the extent this amount is below the carrying value of goodwill, an impairment loss is recorded in the consolidated statements of operations. Estimates of fair value used in the evaluation of goodwill (if necessary based on our qualitative assessment), are based upon discounted future cash flow projections or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as EBITDA, EBITDA margins, revenue growth rates and capital spending requirements, estimates of future cash flow, discount rates, general economic conditions and trends or other available market data. NSAM’s ability to accurately predict future operating results and cash flow and to estimate and allocate fair value impacts the timing and recognition of impairment. While NSAM believes its assumptions are reasonable, changes in these assumptions may have a material impact on its financial results. The following table presents identified intangibles as of December 31, 2016 (dollars in thousands): Gross Amount Estimated Useful Life Accumulated Amortization Net Amount Intangible assets: Customer relationships (1) $ 185,580 20 to 30 years $ (6,488 ) $ 179,092 Performance fees (1) 5,710 2 to 11 years (579 ) 5,131 Trade names 17,820 30 years (545 ) 17,275 Proprietary technology 210 3 years (77 ) 133 Subtotal intangible assets 209,320 (7,689 ) 201,631 Goodwill 243,328 — 243,328 Total $ 452,648 $ (7,689 ) $ 444,959 _____________________ (1) Includes existing customers and expected retention of such customers. The following table presents annual amortization of intangible assets (dollars in thousands): Years Ending December 31: 2017 $ 8,388 2018 8,256 2019 8,199 2020 8,199 2021 8,199 Thereafter 160,390 Total $ 201,631 Other Assets and Liabilities and Accounts Payable and Accrued Expenses The following tables present a summary of other assets, other liabilities and accounts payable and accrued expenses as of December 31, 2016 and 2015 (dollars in thousands): December 31, 2016 2015 Other assets: Note receivable (1) $ 28,485 $ — Deferred tax asset, net 19,543 10,880 Prepaid expenses 8,571 4,781 Prepaid income taxes 6,874 — Due from related party (2) 5,106 — Furniture, fixtures and equipment, net 4,065 4,333 Pending deal costs 3,945 625 Security deposits 2,587 2,380 Other 747 932 Due from participating broker-dealers 133 398 Deferred financing costs, net — 912 Total $ 80,056 $ 25,241 December 31, 2016 2015 Other liabilities: Townsend Funds liability (3) $ 16,516 $ — Deferred tax liability, net (4) 9,442 — Deposit payable 2,420 — Deferred incentive fees (5) 1,913 — Other 556 930 Total $ 30,847 $ 930 ________________ (1) Represents a $28.5 million note receivable from a third party related to the sale of the Island Interest (refer to Note 4) in connection with the Mergers. (2) NSAM recorded the present value of the expected future distribution fees as receivable/income from certain Retail Companies and corresponding payable/expense to participating broker-dealers each of $5.1 million as of December 31, 2016 . (3) Represents an obligation to the sellers who are entitled to approximately 84% of the value of the Townsend Funds at the Townsend Acquisition Date, along with any income related to capital contributed prior to acquisition. NSAM is obligated to fund contributions and is entitled to any income on such contributions subsequent to the Townsend Acquisition Date (refer to Note 4). (4) Primarily represents deferred tax liability related to the Townsend acquisition related to a share deal acquisition of the seller’s corporate entity. The deferred tax liability and corresponding goodwill are recorded at acquisition based on differences between the book and tax basis. (5) Represents incentive fees received that are not yet earned related to the Townsend Funds (refer to below) and as a result, represents a contingent obligation. December 31, 2016 2015 Accounts payable and accrued expenses: Accrued bonus and related taxes $ 46,538 $ 63,935 Incentive fee compensation (1) 12,565 — Accrued operating expenses 17,479 8,771 Accrued payroll 1,273 1,312 Accrued interest payable 3,916 92 Accrued tax withholding (2) 2,310 — Dividends payable related to equity-based awards 526 574 Accrued equity-based compensation awards (refer to Note 9) 896 763 Accrued participating interest buyout (3) — 8,110 Share purchase payable (4) — 6,603 Total $ 85,503 $ 90,160 __________________ (1) Approximately 50% of incentive fees received by the Townsend Funds are due to certain employees of Townsend. Payment is made to such employees when such incentive fee income is earned and approved by executive management of Townsend (refer to below). NSAM records the expense in compensation expense in the consolidated statements of operations when payment becomes probable and reasonably estimable but no later than the period in which the underlying income is recognized. (2) Represents withholding tax related to vesting and net settlement of equity-based awards. (3) Represented a one-time buyout in satisfaction of all participating interests related to non-executive incentive interests in the advisor to NSAM’s first Retail Company (refer to Note 3). (4) Related to the purchase of NorthStar Realty shares which were settled in January 2016 (refer to Note 6). Securities The fair value option provides an election that allows a company to irrevocably elect fair value for certain financial assets and liabilities on an instrument-by-instrument basis at initial recognition. NSAM elected to apply the fair value option for its securities investments because management believes it is a more useful presentation for such investments. Any unrealized gain (loss) from the change in fair value is recorded in unrealized gains (losses) on investments and other in the consolidated statements of operations. Dividend income is recorded in other income in the consolidated statements of operations. Deferred Financing Costs Deferred financing costs represent legal and other third-party costs associated with obtaining financing. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized to interest expense using the effective interest method. Unamortized deferred financing costs are expensed when the associated facility is repaid before maturity. Costs incurred in seeking financing transactions, which do not close, if any, are expensed in the period in which it is determined that the financing will not occur. Revenue Recognition Asset Management and Other Fees Asset management and other fees include base and incentive fees earned from the NorthStar Listed Companies, acquisition, disposition and other fees earned from the Retail Companies and fees earned from clients and limited partners of Townsend. Asset management and other fees are recognized based on contractual terms specified in the underlying governing documents in the periods during which the related services are performed and the amounts have been contractually earned. Incentive fees and payments are recognized subject to the achievement of return hurdles in accordance with the respective terms set forth in the governing documents. Incentive fees that are subject to contingent repayment are not recognized as revenue until all related contingencies have been resolved. Selling Commission and Dealer Manager Fees and Commission Expense Selling commission and dealer manager fees represent income earned by NSAM for selling equity in the Retail Companies through NorthStar Securities. Selling commission, dealer manager fees and commission expense are accrued on a trade date basis. As of December 31, 2016 , commission payable of $5.7 million includes $0.1 million due to NorthStar Securities’ employees. The present value of the expected future distribution fees earned from certain Retail Companies and incurred to participating broker-dealers is recorded gross on the consolidated balance sheets and in the consolidated statements of operations. Allowance for Doubtful Accounts An allowance for a doubtful account is established when, in the opinion of NSAM, a full recovery of a receivable becomes doubtful. A receivable is written off when it is no longer collectible and/or legally discharged. As of December 31, 2016 , there was $0.6 million of allowance for doubtful accounts. Equity-Based Compensation NSAM accounts for equity-based compensation awards, including awards granted to co-employees (refer to Note 9), using the fair value method, which requires an estimate of the fair value of the award. Awards may be based on a variety of measures such as time, performance, market or a combination thereof. For time-based awards, fair value is determined based on the stock price on the grant date. NSAM recognizes compensation expense over the vesting period on a straight-line basis. For performance-based awards, fair value is determined based on the stock price at the date of grant and an estimate of the probable achievement of such measure. NSAM recognizes compensation expense over the requisite service period, net of estimated forfeitures, using the accelerated attribution expense method. For market-based measures, fair value is determined using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. NSAM recognizes compensation expense over the requisite service period, net of estimated forfeitures, on a straight-line basis. For awards with a combination of performance or market measures, NSAM estimates the fair value as if it were two separate awards. First, NSAM estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, NSAM recognizes the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, NSAM records compensation expense based on the performance-based measure. NSAM would then record a cumulative catch-up adjustment for any additional compensation expense. Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. The awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any. In connection with the Mergers, substantially all outstanding time-based equity awards issued to executives and non-executive employees vested in accordance with their terms. In addition, all or a portion of the outstanding NSAM performance-based awards issued to executives and non-executives vested in accordance with their terms, subject to forfeiture and reduction. As such, substantially all remaining unrecognized compensation cost was recognized immediately. Foreign Currency Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment is recorded as a component of accumulated OCI in the consolidated statements of equity. Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the spot currency exchange rate at the time of the transaction. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on foreign currency in the consolidated statements of operations. Comprehensive Income (Loss) NSAM reported consolidated comprehensive income (loss) in a separate statement following the consolidated statements of operations. Comprehensive income (loss) is defined as a change in equity resulting from net income (loss) and OCI. The component of OCI includes an adjustment for foreign currency translation. Earnings Per Share NSAM’s basic earnings per share (“EPS”) is calculated using the two-class method for each class of common stock and participating security as if all earnings had been distributed by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS reflects the maximum potential dilution that could occur from NSAM’s share-based compensation, consisting of unvested restricted stock awards, restricted stock units (“RSUs”), performance common stock or other contracts to issue common stock, assuming performance hurdles have been met, were converted to common stock, including limited partnership interests in the NSAM OP which are structured as profits interests (“LTIP Units”). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. NSAM’s unvested restricted stock awards, certain RSUs and LTIPs Units contain rights to receive non-forfeitable dividends and thus are participating securities. Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, net income is first reduced for distributions declared on all classes of participating securities to arrive at undistributed earnings. Under the two-class method, net loss is reduced for distributions declared on participating securities only if such security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity. Income Taxes Certain of NSAM’s subsidiaries are subject to taxation by federal, state, local and foreign authorities for the periods presented. On March 13, 2015, NSAM restructured by forming the NSAM OP, under Delaware law, by converting an existing limited liability company disregarded as separate from NSAM for federal income tax purposes to a Delaware limited partnership and admitting as limited partners LTIP Unit holders. The NSAM OP is taxed as a partnership for federal income tax purposes and consequently, its items of income gain, loss, deduction and credit are passed through to, and included in, the taxable income of each of its partners including NSAM. For the period prior to March 13, 2015, NSAM and its U.S. subsidiaries filed consolidated federal income tax returns. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred tax assets and liabilities. Recent Accounting Pronouncements The below represent the evaluation by Colony NorthStar of the impact of recent accounting pronouncements on its consolidated financial position, results of operations and financial statement disclosures subsequent to the Mergers as it relates to NSAM’s historical business. In May 2014, the Financial Accounting Standards Board (“FASB”) issued an account |
